Sterling sank against the dollar on Wednesday after official figures revealed
an unexpected decline in retail sales last month, led by a sharp fall in
food sales.

As unsettled weather and rising food prices put off shoppers, retail sales volumes including fuel sank 1.3pc month-on-month, confounding economists' forecasts for flat sales. Dragging down sales was a 4.1pc plunge in food sales, its worst showing in almost two years.

Sterling took a sharp fall after the figures, declining almost 0.5pc against the dollar to $1.5083, heading close to its lowest level since early April.

The Office for National Statistics, which published the figures, said retailers had indicated that poor weather hindered their spring and summer ranges, with sales of barbecue food and garden furniture taking a hit.

Consumer spending, which accounts for 60pc of Britain's gross domestic product, has been pressured in recent years by below-inflation wage growth, worries about the economy and government austerity measures.

"This rise in prices will have squeezed consumers’ disposable income, possibly resulting in them buying less or substituting cheaper goods for their normal purchases," said the ONS.

Excluding fuel, retail sales fell 1.4pc in April from March and were up 0.2 percent from a year earlier. Sales of clothing, textiles and footwear rose 1.2pc year-on-year in April, while household goods stores saw sales increase 3.8pc.

The amount spent decreased by 0.2pc over the year, which the ONS said is the largest contraction on record.

Retailers have continued to be circumspect about the consumer spending environment. Marks & Spencer said on Tuesday that the consumer backdrop remains “challenging” while Next said this month it is “cautious” about the consumer environment.

On Wednesday, the IMF presents its annual healthcheck on the UK and the international body is expected to suggest that deficit reduction should be slowed amid anaemic growth. The “Article IV” report is expected to recommend Mr Osborne change his plans and borrow more to invest in infrastructure or cut taxes.

Howard Archer, chief economist at IHS Global Insight, said: "Much of the latest news on the UK economy has been relatively encouraging; but even allowing for the negative impact of ongoing cold weather and the fact that Easter occurred in March this year, April’s marked drop in retail sales provides a reminder that the economy is not yet out of the woods and still has a challenging job to develop sustained, clear growth."